PAT mostly in line with our forecast; retain previous estimates and 2-yr target price of Rs550 on robust branded domestic business and international generics outlook

Result table

(Rs m)

Q1 FY15

Q4 FY14

% qoq

Q1 FY14

% yoy

Net sales

4,943

4,640

6.5

4,272

15.7

RM & packing

(1,205)

(1,350)

(10.7)

(1,229)

(2.0)

Purch of traded goods

(565)

(413)

36.8

(495)

14.1

Staff

(756)

(672)

12.6

(564)

34.2

Marketing expenses

(520)

(309)

68.3

(438)

18.7

R&D

(295)

(312)

(5.4)

(224)

31.8

Other expenditure

(635)

(673)

(5.6)

(607)

4.7

Operating profit

967

913

5.9

715

35.2

OPM (%)

19.6

19.7

(12) bps

16.7

282 bps

Depreciation

(107)

(110)

(2.5)

(95)

12.4

Interest

(6)

(23)

(75.5)

(15)

(61.9)

Other income

2

28

(93.5)

0

PBT

856

808

5.9

605

41.5

Tax

(203)

(195)

4.1

(139)

46.3

Effective tax rate (%)

23.7

24.1

(43) bps

22.9

79 bps

Associate share

0

-

-

-

-

Adjusted PAT

653

613

6.6

466

40.1

Adj. PAT margin (%)

13.2

13.2

1 bps

10.9

230 bps

Extra ordinary items

(7)

-

-

-

-

Reported PAT

647

613

5.5

466

38.7

Source: Company, India Infoline Research

Alembic reports largely in line quarter

Alembic pharma posted YoY revenue growth of 15.7% at Rs4.9bn vs our estimate of ~Rs5bn driven by healthy rise in India branded business (+16.3% yoy vs est. 15% yoy) and International generics (+33% yoy). Revenues from international generics business were lower than expected as company reduced sales from low margin business (~contract manufacturing types) to focus on high margin products and also due to some impact from pricing adjustments. Company indicated in its post earnings call that new product launches would be reflected in sales from Q3 onwards. Share of specialty segment at 59% of domestic branded business.

EBIDTA margin dips qoq on higher marketing spends

Q1 EBIDTA margin up ~280bps yoy but declined marginally on qoq basis as marketing spends (+386bps qoq) for branded segment increased due to launch of new divisions. Company mentioned that once critical mass is reached in such areas (at least 2 quarters away), the impact would be mitigated. Also staff costs rose 210bps yoy and 83bps qoq driven by addition to field force of 400 people (all in Specialty segment) due to additions of new divisions.

Revenue breakup

Segment (Rs mn)

Q1 FY15

Q1 FY14

% yoy

Formulations

India Branded

2,233

1,920

16.3

India Generics

252

265

(4.7)

International Branded

227

150

51.1

International Generics

1,138

855

33.2

API

1,063

1,070

(0.6)

Export incentives

48

29

66.6

Total

4,961

4,288

15.7

Source: Company, India Infoline Research

Retain BUY on robust domestic branded and int’l generics outlook

Alembic has filed 3 ANDAs during the quarter taking cumulative ANDA filings to 64 while it also got 3 ANDA approvals taking cumulative ANDA/NDA approvals to 35 (including 5 tentative approvals). We expect domestic branded business to post high teens growth while international generics too would continue to compound at a robust run rate. Company reiterated its FY15 capex guidance of Rs2.5bn which indicates strong revenue visibility in FY16 and beyond. We stick to our FY15/16/17 estimates and retain BUY with unchanged 2-yr target of Rs550.

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